This week Advantage Business Angels managing director Neil Mackay asks where is the best place to save now that pensions are a key worry
The stock market has been in the news again with a bit of turbulence, and, as I write this, is about ten per cent off its recent peak.
Twenty years ago this would have been dull, but many more people now realise that their pension is driven by the stock market. Most people, let alone the professional investment managers, will be aware of the economic challenges from China et al and of the Marconis and Rolls-Royces of this world. So we should expect confidence to be a bit thin.
There was an article in the paper talking about alternative investments including wine and commodities.
What would you put your money in?
Housing? The value of all the housing stock in the UK is pretty much twice that of the UK stock market. Think about that, where we live is double the value of the biggest companies we work in. There are some 25 million households in the UK. Seventy per cent are owned - say 17.5 million with about 11.5 million of these mortgaged. What is the outlook for this asset?
There are warnings from financial advisors and I think from Government counselling people against relying on any value in their property to cover their pension.
Given that first time buyers drive the market it is easy to see why.
In 1984 first time buyers took out 569,000 new mortgages - 52 per cent of the total - on an 85 per cent valuation with loan to income ratio of 1.9. In 2005 the corresponding figures were 364,000 mortgages - 37 per cent of the total - on a 90 per cent valuation with loan to income ration of 3:1.
There is little doubt that during the last 50 years or so property has been a pretty secure investment growing in value, even if primarily as a refuge from the UK's historically high levels of inflation. But what of the future?
So where else might your money go? Commodities? Well most are at all time highs driven by the demand from China. But how confident do you feel in trading copper futures?
Art? Can you spot a fake or do you know who is going to be fashionable in 25 years time? I suppose it can sit on a wall and decorate the room, maybe even inspire you to achieve great things but keep it away from the bright sunshine.
I suppose you could tuck it up safely in a savings account, with a bit of it tax free. But the returns at best look miserable especially on an after-tax and inflation basis.
How about an early stage business? Sure you know that they are risky but at least they make a decent return when they work.
If you have the experience and skills to look at the different investments fine but if not you will probably want to talk to a financial advisor and this is where the issue starts. This is where politicians in an effort to protect us from risk and fraud have created a decidedly unenterprising culture.
Next week I want to unpick this a bit.